Why companies could soon pay for climate change

This is an audio transcript of the Behind the Money podcast episode: Why companies could soon pay for climate change

Topher Forhecz
A few hundred miles north of Peru’s capital of Lima, lives a farmer named Saúl Luciano Lliuya. He’s lived in the region all his life. But in 2015, he filed a lawsuit against the largest utility company in Germany. What stands out about this lawsuit is that the utility called RWE has no operations in Peru, but Saúl says that he and his company on another continent do have something to hash out, and it has to do with a glacier that is melting near his city.

Camilla Hodgson
So essentially he is asking RWE to help pay for the cost of defending Huaraz, which is his hometown, from a potential flood. The city is below a lake and there’s a risk that as climate change accelerates, an avalanche will collapse into the lake and the lake will spill down into the city, which could be potentially catastrophic.

Topher Forhecz
That’s Camilla Hodgson. She’s a climate reporter at the FT.

Camilla Hodgson
And the reason that he’s suing them is because they are one of Europe’s biggest polluters, a major industrial polluter for over 100 years now. And so his kind of claim is that they’ve, they’re responsible for X proportion of global emissions. Therefore, they should pay for X proportion of the costs.

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Topher Forhecz
This case is believed to be the first time a resident of one country has sought compensation from a polluter based in another country. Camilla says this could be a big deal. A victory would set a precedent and that could open the door for other lawsuits against polluters.

Camilla Hodgson
It would mean that other big polluters are at risk from similar cases. And really, anyone, an individual or a company could file a similar case and say, look, we’re at risk from this wildfire, or we were flooded out of our house and we want to hold polluter X to account because they contributed to the problem.

Topher Forhecz
On today’s episode, we explore this unusual legal case and how activists are trying to combat climate change through the courts. I’m Topher Forhecz, in for Michela Tindera. From the Financial Times, this is Behind the Money.

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Topher Forhecz
Camilla, welcome to the show.

Camilla Hodgson
Thank you. Good to be here.

Topher Forhecz
So, Camilla, why did Saúl and his team choose to sue RWE?

Camilla Hodgson
One of the reasons why RWE is being sued is because the case has been filed in Germany. It’s all being done under German law. And they’re kind of the obvious big industrial polluter that you would choose or you could choose to file such a case against if you were using German law. It’s also just, in the grand scheme of global industrial polluters, it’s one of the biggest, according to a 2014 study that tried to outline all the biggest industrial polluters. And really the legal team of just said, you don’t need many more reasons than that. The point is it, it’s partly the case is to make a point. It’s to say this is, you know, polluters should have to pay for the damage that they are causing. It doesn’t really matter where the emissions are emitted. They all contribute to climate change, which is a global phenomenon. It affects every country all over the world in different ways. And so it’s kind of in a way, it’s irrelevant that RWE doesn’t have a presence in Peru.

Topher Forhecz
So what does Saúl have to prove in order to win his case?

Camilla Hodgson
So there are two main tests. One is he needs to show that his home is at significant and imminent risk of flooding. So the judges, legal experts, scientific experts have just returned back from a trip to Peru. They were there on a kind of fact-finding mission to gather evidence about to what extent is Huaraz endangered? Is there a kind of significant and imminent risk to the city? And the second thing is he needs to show or his team needs to show that RWE is to blame, essentially. They need to show a kind of causal link between the pollution RWE emitted and climate change and the effects of climate change. And the court needs to . . . the German judges need to agree that RWE is legally culpable for at least a portion of the damage and therefore should help pay towards the solution.

Topher Forhecz
So, Camilla, where are we in the case right now?

Camilla Hodgson
So where we are now is that the scientific experts are gonna, they return home. They’re gonna come up with a kind of analysis of what they found out in Peru. They’ll present that opinion to the German court and the legal team will then need to start work on the second question, which is about essentially is RWE to blame? And that won’t necessarily require a trip anywhere. That’s kind of a more, it’s science that you can do with modelling and desktop analysis rather than having to go all the way to Peru. So it’s possible that we’ll get a ruling or a decision, I should say, by the judges this year. I think more likely is next year because it’s, it is a very complicated case. There’s a lot to work through.

Topher Forhecz
The second question, that RWE is responsible for risk from historic emissions is provable through something called attribution science. What is attribution science?

Camilla Hodgson
Yes. So that’s this fairly new speciality or scientific field of study. And people use it for different things. But essentially it’s trying to identify either whether climate change made an event, a disaster like a flood more likely or more severe. And you can also use it to try and trace back pollution to an emitter and say, you’re responsible for this and you’re responsible for that. And it’s a fairly new field of science. It’s been around about 20 years. It’s one, it’s something that’s really evolved quite fast. And there’s an increasing interest in it, both from kind of citizens who are interested in understanding why there’s a heatwave, for example, but also for legal cases like this and this idea that you can kind of hold polluters to account.

Topher Forhecz
So what is RWE’s response to Saúl’s claims?

Camilla Hodgson
So RWE have said there’s not a case for them to answer. They don’t believe that German law can kind of legitimately be used in this way, or that individual polluters should be held to account in this way for something that is a global problem and has been contributed to by companies and individuals and societies all over the world.

Topher Forhecz
What sort of compensation is Saúl looking for?

Camilla Hodgson
So Saúl is really only looking for about €20,000, so not a huge sum of money by any stretch for a big company like RWE. The reason he’s looking for that is because it’s approximately 0.47 per cent of what he thinks or what the authorities think it will cost to protect the town of Huaraz. And 0.47 per cent is, according to this 2014 study, what RWE is responsible for when it comes to global industrial emissions of carbon and also methane. It all gets a little bit in the weeds and the amount of money that is being sought is actually not that much. And so you might think RWE would just pay that and be done with it. But the problem is it’s really, that would set a huge precedent. It would then open the door for other plaintiffs to bring claims against other companies or indeed against RWE. And so they’re really, they’re keen to have just, either win the case, have the case thrown out, appeal against a decision that goes against them. It’s important to them and I guess to other big polluters as well, that they are not seen to, you know, they don’t have to pay this money. And a precedent isn’t set by which it would be much easier to bring kind of copycat cases.

Topher Forhecz
Right. It seems like they’re, there are sort of all these little things that are lining up that allow a case for this to go forward. And one of those things, you know, much like attribution science, one of those things is the Paris agreement. Why is the Paris agreement critical to this story?

Camilla Hodgson
Yeah, that’s important because it kind of sets the international context, the framework. You’ve got all these countries, more than 190 countries that have agreed to limit warming to well below two degrees. And as part of that, you’ve seen, or as a result of that, you’ve seen legal cases spring up where people are trying to hold individual countries to account, saying, look, you committed to this. In many cases it’s enshrined in law. And so you need to basically live up to your promise. And there are all sorts of examples of cases being brought where people say Country X is not doing what they said that they would do, or these plans are not in line with well below two degrees.

Topher Forhecz
So someone could point to the Paris Agreement and say to a country, well, you promised to do X, Y and Z, and you haven’t. Or you haven’t created regulations for companies that would help meet those goals.

Camilla Hodgson
I think what the Paris Agreement has done is just, it’s set, in very stark terms, what the goal is. And countries have committed to this goal. There are all sorts of plans in place as a result of this goal. And so when a country or a company is deviating from that, it’s kind of easier to say, you’ve got a very clear reference point to say you are, in theory, not on track for this very important goal. And you’ve just seen a real wave of litigation since the Paris Agreement was signed in 2016.

Topher Forhecz
Can you talk about that? I mean, what other cases are sort of similar to this one?

Camilla Hodgson
So, yeah, there’s been a bunch of climate litigation. All kinds of different things. This is kind of a unique case in that it’s the first where you’ve got an individual in one country suing a company in another on these grounds, on a kind of, you know, looking for damages in this way. Or at least it’s thought to be the first. There was a ruling against Shell last year, which was very significant, which essentially, a Dutch court said to Shell: you need to make steeper emissions cuts. You have a duty of care to Dutch citizens and you’re basically not doing enough. And there was also a case in France, I believe it was last year as well, when a Paris court said to the French government, similarly, you’re not doing enough. You made these promises under the Paris Agreement, and you’re simply not doing enough to cut emissions and to put France and the world on track. So, I mean, there are, there are hundreds more cases, not all so high-profile. And they’re not all about kind of holding people to their promises that, you know, they are greenwashing cases, stuff to do with how you market your products and are you being responsible in your claims. There’s all sorts of stuff emerging and it really feels like the kind of floodgates have opened. There’s, there are more and more of these cases all the time. And it feels like we’re just gonna see more of them. It doesn’t feel like that kind of, the eagerness to use the courts to hold people to account is going away anytime soon. And partly I think that’s because there’s a kind of lack of, in many cases, there’s a lack of another mechanism because a company may not be legally obliged to cut its emissions. Countries, even though they’ve signed up to the Paris Agreement, there’s no enforcement mechanism in the Paris Agreement. So it’s kind of a, you’re taking these countries at their word. So there’s kind of plenty of scope for legal cases to be brought as one way to kind of force action in lieu of a better method.

Topher Forhecz
Did you hear any criticisms about addressing climate change through the courts?

Camilla Hodgson
Yeah, there are definitely people that have concerns about it. I mean, it’s not, frankly, very practical to bring this kind of a case for every disaster in every country against every big polluter. You’d end up with thousands and thousands of cases against some of the same companies and just all sorts of companies all over the place. And perhaps it would end up with the big polluters really in the crosshairs and then smaller polluters being ignored. And you could argue all day about whether or not that’s fair, but it does become kind of spotty and almost a bit random. Some people think that really the answer is regulation. You need governments to say this is what you are obliged to do, companies in X sectors or companies across the board. And then you kind of set a standard that all companies have to abide by. And that’s, it’s a level playing field that seems fairer, perhaps. The problem is that that really doesn’t exist. And so you’ve kind of, in lieu of regulation or some other solution, you’ve got activists taking companies to court and hoping that that will either trigger change from the companies or it will trigger some other legal change. It’s basically just a . . . it’s one solution where people don’t think there is another.

Topher Forhecz
So what would this lawsuit mean for vulnerable countries that are seeking compensation for climate change from rich countries?

Camilla Hodgson
Yeah, that’s a really contentious issue, as you would expect. It’s something that always gets fought about at COPs, the annual climate summits, and is expected to be a big point of contention this year at, in Egypt. Essentially, lots of vulnerable and developing countries would say rich countries really owe us some compensation or some assistance, given that historically we have not been big polluters, but we are on the front lines of climate change. And so it’s a possibility that a case like this could set a precedent whereby a polluter compensates the kind of victim of climate change or a climate disaster, and then that is used to bring cases between countries. So this is obviously, this is a citizen suing a company, but you could imagine the model working between two countries. And there’s a lot of research under way about how that could work. There’s an organisation that is seeking kind of technical legal opinions about whether that kind of a case is possible to bring. So I don’t think it’s out of the question. I think it’s something that, it kind of feels like a last resort, really. I don’t think anyone wants to be bringing these sorts of cases. They’re lengthy, they’re expensive. But if you . . . but if vulnerable countries feel like rich countries are not going to do enough to help them, and they’ve been pushing and pushing and they’ve, they feel like they’ve made no progress. I guess, in theory, this is one way to try and force action.

Topher Forhecz
And are other countries thinking about suing polluters who are elsewhere?

Camilla Hodgson
So, last year, Antigua and Barbuda and Tuvalu established this new group, which is called the Commission of Small Island States on Climate Change and International Law. And that group plans to seek opinions from international courts and tribunals, things like the International Court of Justice. They plan to seek legal opinions from international courts about whether they could bring those kinds of compensation cases. There aren’t any of those cases actually in the works. It’s kind of . . . they’re looking basically for kind of advice from established international bodies that deal with intercountry disputes about whether a case could be brought and how that might work. So I think there’s a prospect . . . the prospect is there. It could well happen that such a case is brought. The forum in which it was brought is I’m not sure quite what that would look like or how such a case would be structured or, you know, how it would go. It’s all kind of theoretical at this point, but I think it’s definitely plausible that such a case could be brought. There’s certainly interest.

Topher Forhecz
And if Saúl were to win this case, would that help bolster those countries’ cases, those theoretical cases?

Camilla Hodgson
I imagine it would help, just from the point of view of, you’ve shown that kind of causal link. You’ve proved legal culpability. Even if a case, even if a case brought from, by one country against another country is brought in a kind of different forum and using different law, I’m sure it would help to have one of these kind of compensation cases in the bag to kind of reference and to just to draw from, to draw inspiration from, to understand how those legal arguments were made and, you know, why it was successful.

Topher Forhecz
Would activists still consider this a victory even if Saúl loses?

Camilla Hodgson
I think the amount of attention that it has got has already kind of been a victory in some activists’ eyes. I think the fact that this case has got as far as it’s got is something of a victory in itself. Yeah, it’s unusual. It’s a kind of unprecedented case. It’s a test case. And even if he’s not successful, you’d be able . . . a legal expert or activists would be able to kind of untangle what was successful, what wasn’t, where the claim fell down in legal terms. So I think it’s been a big deal in terms of the, you know, the press that it’s garnered, the attention from legal experts that it’s attracted. And I think it’s, we’re likely to see other similar cases, whether or not this one is successful.

Topher Forhecz
Camilla, thanks for coming on the show.

Camilla Hodgson
Thanks so much.

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Topher Forhecz
You can find the link to Camilla’s article on this case in our show notes. Today’s Behind the Money was hosted by me, Topher Forhecz. Stephanie Horton is our contributing producer. Sound design and mixing by Sam Giovinco. Special thanks to Jess Smith and Michela Tindera. Cheryl Brumley is the global head of audio. Thanks for listening. See you next time.

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